Since the RBA cut the official cash rate to a new record low of 0.75% on Tuesday, most of the attention has been on whether the banks would pass the full 25 basis point cut to home loan customers (spoiler: the big four banks only passed on 0.13-0.15%).
As such, several pointed remarks made by RBA Governor Philip Lowe in regards to lenders’ “tight” lending standards imposed on SMEs have flown under the radar.
“In some areas the pendulum may have swung a bit too far,” Dr Lowe said at the Reserve Bank Board Dinner on Tuesday night.
“It is important that our financial institutions support small businesses in particular. Lenders should not be so scared of making a loan that goes bad that they don’t provide the credit that the economy needs.
“We will all be better off if businesses have the confidence to expand, invest, innovate and hire people.”
Dr Lowe’s comments come just weeks after a number of reports highlighted many small businesses were struggling due to financing complications.
One report, by market analysis firm East & Partners on behalf of Scottish Pacific, showed that more than one-in-five business owners said that being rejected from a lending product was the main reason for their cash flow issues.
Another report, by the Australian Banking Association (ABA), showed that while 9 million Australians have dreamed of starting their own business, 60% are held back from their dreams due to ‘access to money’.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has urged lenders to heed Dr Lowe’s advice.
“The overwhelming feedback to my office from the small business community is that a lack of access to funding is their biggest barrier to growth,” Ms Carnell said.
“If our financial institutions change the way they do business with SMEs, it might just give small businesses the confidence they need to grow, which would be of significant benefit to the Australian economy.
“It’s time we all sit up and listen to the RBA Governor.”
Let’s face it: sitting around waiting for everyone else to listen to the RBA Governor probably isn’t the most proactive business strategy if you’re in need of equipment or asset finance for your business.
So if you’re an SME owner looking to fund your business’s growth, then get in touch.
We’ve got a number of lenders on our panel and would be happy to run you through some options to help you grow your business.
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